McGeorge Law Review

Volume 32 | Issue 2 Article 24

1-1-2001

Estates and Trusts / It's My Money 'Til I Die:When Trustees Must Notify Heirs andBeneficiaries Concerning a Trust That Has BecomeIrrevocableErik R. Beauchamp

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Recommended CitationErik R. Beauchamp, Estates and Trusts / It's My Money 'Til I Die: When Trustees Must Notify Heirs and Beneficiaries Concerning a TrustThat Has Become Irrevocable, 32 McGeorge L. Rev. 670 (2001).Available at: https://scholarlycommons.pacific.edu/mlr/vol32/iss2/24

"It's My Money 'Til I Die": When Trustees Must NotifyHeirs and Beneficiaries Concerning a Trust That HasBecome Irrevocable

Erik R. Beauchamp

Code Section AffectedGovernment Code § 53216.8 (new); Probate Code §§ 16061.9 (new);16060.5, 16061.5, 16061.7, 16061.8 (amended).AB 460 (Ackerman); 2000 STAT. Ch. 34

I. INTRODUCTION

One very potent power used in some trusts is the power to revoke.1 But whenthat power can no longer be used, the trust is considered irrevocable and the settlor2

has much less power to influence the trust.' Heir4 notification requirementscompound this loss of power.5 Prior to Chapter 34, trustees6 were required to notifyheirs whenever a trust became irrevocable even if the settlor was still alive.7Unfortunately, this brought up privacy concerns. After all, when a person givesaway money under other circumstances, she is not required to tell her heirs about it.9For example, when a person gives non-trust money to charity or gives a gift to afriend, she is under no obligation to tell her heirs.' Why should she have to tell her

1. 3 CALIFORNIA CIVIL PRACTICE PROBATE AND TRUST PROCEDURE § 24:4 (1995).2. A settlor is a person who establishes a trust by transferring her property to be held in trust. RESTATEMENT

(THIRD) OF TRUSTS § 3 (Tentative Draft No. 1, 1996). Some use the term "trustor" in place of "settlor." William L.Hoey, Personal Liability of Trustees Under the Comprehensive Environmental Response, Compensation andLiability Act (CERCLA), 68 U. Det. L. Rev. 73, 77 n. 27 (1990).

3. See RESTATEMENT (THIRD) OFTRUSTS § 25 cmt. b (Tentative Draft No. 1, 1996) (stating that the validityof an inter vivos revocable trust "is not affected by the fact that the interests of all beneficiaries other than the settlordo not take effect" until a condition or the settlor's death occurs).

4. A decedent's heirs, in the technical sense, are family members who will inherit by intestate successionif part or all of the decedent's property is not distributed upon her death through an instrument like a will or trust.RESTATEMENT (THIRD) OF PROPERTY: WILLS & DONATIVE TRANSFERS § 1.1 cmt. a (1998).

5. See 1998 Cal. Legis. Serv. ch. 682, sec. 10, at 7 (amending CAL. PROB. CODE § 16061.7(a)(1)) (requiringthat heirs must be notified if the trust becomes irrevocable for any reason).

6. A trustee is a person who has legal title to trust assets and manages the property for the beneficiaries whohave equitable title to trust assets. RESTATEMENT (THIRD) OF TRUSTS § 2 cmt. d (Tentative Draft No. 1, 1996).

7. Compare CAL. PROB. CODE. § 16061.7(a)(1) (amended by Chapter 34) (requiring the trustee to sendnotification when the trust becomes irrevocable based on the death of the settlor), with 1998 Cal. Legis. Serv. ch.682, sec. 10, at 7 (amending CAL. PROB. CODE § 16061.7(a)(1)) (mandating that the trustee to send notificationwhen the trust becomes irrevocable for any reason).

8. ASSEMBLY COMMI-rEE ON THE JUDICIARY, COMMITrEE ANALYSIS OF AB 460, at 4 (Jan. 11, 2000).9. Id.10. Infra note 97 and accompanying text.

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heirs merely because she uses a trust to give away the money? Chapter 34 remediesthis concern.1 It promotes privacy for the settlor by allowing her to use theflexibility of a trust without having to notify her heirs of what she does with her ownmoney. 12

II. EXISTING AND PRIOR LAW

A. General Principles

A trust is a vehicle whereby property, personal or real, is managed by the trusteefor the benefit of beneficiaries. 3 The settlor creates the trust either during herlifetime, in a living trust, or by will, in a testamentary trust.' 4 The settlor can also bethe trustee.1 5 Often, the trustee is one of the beneficiaries; however, a trustee cannotbe the sole beneficiary.' 6 Furthermore, the trustee must owe a duty to someoneelse.1

7

Trusts are extremely flexible and have been gaining popularity as a way to avoidprobate, prepare for problems in old age, and control one's wealth after death.'8 Atrust is also a good way to give management functions to a person more qualifiedthan the settlor, especially if the settlor becomes incapacitated.' 9 Additionally, a trustcan be used to manage investment funds and pensions. 20 The uses of a trust arenearly unlimited.2'

11. CAL. PROB. CODE § 16061.7(a)(1) (amended by Chapter 34).

12. See ASSEMBLY COMMITTEE ON THE JUDICIARY, COMMITrEE ANALYSIS OF AB 460, at 4 (Jan. 11, 2000)

(indicating that the prior law requiring heirs to be notified when the trust became irrevocable for any reason

impinged on the privacy rights of the settlor).13. RESTATEMENT (THIRD) OF TRUSTS § 2 (Tentative Draft No. 1, 1996). A beneficiary is a person who has

equitable title to and receives the benefits of trust assets. Id. cmt. d.14. Id. § 2 cmt. d, illus. 3, 5.15. Id. § 10(c).16. RESTATEMENT (SECOND) OF TRUSTS § 341(1) (1959).

17. See Id. § 341 (illustrating several situations in which a trust is not terminated if one of severalbeneficiaries becomes a trustee, the sole beneficiary becomes one of several trustees, or all the beneficiaries also

serve as the only trustees, but stating that a trust is terminated if the sole beneficiary becomes the sole trustee).18. RESTATEMENT (THIRD) OFTRUSTS Pt. I Ch. 1 introductory Note (Tentative Draft No. 1, 1996); Micheal

T. Maurer & John F. Friedemann, Lending to Family Living Trusts, CONSUMER FtN. L. Q. REP. 198 (1998).19. Jay R. Larsen, Avoiding Probate: Pitfalls and Perks, 4-Mar. Nev. Law. 12, 14 (1996) (stating that a trust

is used for people who do not want to be burdened with the management of assets and concluding that a trust is agood planning device in planning for incapacity).

20. 11 B.E. WrrKIN, SUMMARY OF CALIFORNIA LAW, Trusts § 2 (9th ed. 1990)21. Id.

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B. Revocable Trusts

Although trusts are instruments in which no one really has the completeownership of the trust assets, some trusts can be revoked by the settlor.22 Most statesrequire that a clause be inserted into the trust instrument stating that the trust isrevocable, but California law assumes that a trust is revocable and requires that aclause be inserted into the trust instrument if the settlor intends it to be irrevocable. 3

A settlor can revoke a trust at any time during her lifetime or in her will if the trustprovides for revocation by will.24 Additionally, a settlor can change the "terms of thetrust" unless changing the trust is forbidden by the trust instrument.25 Essentially, thesettlor of a revocable trust has a great deal of power in determining whether the trustwill remain in a particular form, or whether the trust will remain in existence at all.26

As long as a trust is revocable, a beneficiary has little say about how the trust is runand can be kept in the dark as to the "terms of the trust. '27 Indeed, a beneficiary canhave the benefits of the trust which she presently enjoys, or will enjoy in the future,taken from her by a revocation of the trust. 28

However, a trust does not remain revocable forever.29 In most cases, a trustbecomes irrevocable upon the death of the settlor.3° With the exception of revokinga trust by will, a settlor obviously cannot personally revoke a trust after her death.3'But the "terms of the trust" can be written so that the trust becomes irrevocablewithin a specified period before or after the date of death.32 For example, a trustinstrument can set the time of irrevocability to be one day before the settlor'sdeath.33 The trust instrument can also expressly state a particular date upon which

22. RESTATEMENT (THIRD) OF TRUSTS § 2 cmt. d (Tentative Draft No. 1, 1996); 3 CALIFORNIA CIVILPRACTICE PROBATE AND TRUST PROCEEDINGS § 24:3 (1995).

23. CAL. PROB. CODE § 15400 (West 1991); Gail Boreman Bird, Trust Termination: Unborn, Living, andDead Hands-Too Many Fingers in the Trust Pie, 36 HASTINGS L. J. 563, 565 (1985).

24. CAL. PROB. CODE § 15401 (West 1991).25. See WITKIN, supra note 20, § 201 (stating that "the unrestricted power to revoke implies a power to

amend without revoking").26. See CAL. PROB. CODE § 15401 (empowering a settlor to revoke or modify the trust instrument).27. See WITKIN, supra note 20, § 160 (acknowledging that beneficiaries do not have a right to petition the

court regarding trust matters until the person with the power to revoke is no longer able to exercise that power); seealso RESTATEMENT (THIRD) OF TRUSTS § 25 cmt. a (Tentative Draft No. 1, 1996) (stating that beneficiaries ofrevocable trusts have the same rights as devisees of a will before the will takes effect at the testator's death).

28. See RESTATEMENT (THIRD) OF TRUSTS § 25 cmt. a (Tentative Draft No. 1, 1996) (illustrating that aperson with the right to revoke has the power over the trust and the beneficiary has few rights in regard to arevocable trust).

29. See CAL. PROB. CODE § 15401 (West 1991) (describing the ways that a trust can be revoked by thesettlor); 1 CALIFORNIA TRANSACTIONS FORMS--ESTATE PLANNING § 1:8 (1999).

30. See ASSEMBLY COMMITTEE ON THE JUDICIARY, COMMITTEE ANALYSIS OF AB 460, at 4 (Jan. 11, 2000)(stating that a revocable trust can become irrevocable at the death of the settlor or upon a date set in relation to thedeath of the settlor).

31. CAL. PROB. CODE § 15400 (West 1991).32. ASSEMBLY COMMITTEE ON THE JUDICIARY, COMMITTEE ANALYSIS OF AB 460, at 5 (Jan. 11,2000).33. Id.

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the trust becomes irrevocable which is not related to the death of the settlor 34 Or

irrevocability, pursuant to the trust instrument, can be conditioned upon the

occurrence of a particular event.35

C. Fiduciary Duties

1. Duties Generally

A trustee's duties to a beneficiary are burdensome.36 Not only must the trustee

avoid conflicts of interest and self-dealing, but she must also avoid commingling

trust assets with her own; she must be particularly careful in choosing which

investments she places the trust's assets.37 Whether the trustee acts in good faith

when she breaches a duty is irrelevant.38 If she is not careful and losses occur, she

can be personally liable.39 Moreover, if she breaches a fiduciary duty with one

investment creating a loss, the trustee may be liable for that investment even though

the investment portfolio performed well overall. 4°

A trustee also has to work impartially for the benefit of all the beneficiaries.41

She must maximize income for the current beneficiaries while retaining principal for

future beneficiaries.42 This requires the delicate balancing of the investment

portfolio so that neither current nor future beneficiaries find reason to complain; but,

even with the best of efforts, this goal may not be accomplished.43

2. Notification of Heirs and Beneficiaries and the Statute of Limitations for

Contesting a Trust

In addition to the duties above, trustees must also keep beneficiaries "reasonablyinformed of the trust and its administration." 44 Of course, while the trust is

revocable, the trustee does not have the duty to inform the beneficiaries unless the

settlor wishes the trustee to keep them informed. 5 However, once a trust becomes

irrevocable, a trustee is required to provide notification to the beneficiaries and the

34. Id. at 4.35. RESTATEMENT (THIRD) OF TRUSTS § 25 Rep. Note cmt. b (Tentative Draft No. 1, 1996).

36. 12 B.E. WITKIN, SUMMARY OF CALIFORNIA LAW, Wills and Probate § 891 (9th ed. 1990 & Supp. 1998)

(stressing that a guardian is absolutely liable for losses if she surrenders control over assets).

37. RESTATEMENT (THIRD) OF TRUSTS, PRUDENT INVESTOR RULE, § 170 (1990); RESTATEMENT (SECOND)

OF TRUSTS § 179 (1957).

38. RESTATEMENT (THIRD) OF TRUSTS, PRUDENT INVESTOR RULE, § 170, cmt. d.

39. Id.40. Id. § 213 cmt. c. (1992)41. Id. § 232.42. Id. § 232 cmt. c.43. Id.

44. CAL. PROB. CODE § 16060 (West 1991).45. WITKIN, supra note 20, § 85.

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settlor's heirs if the trust became irrevocable because of the death of the settlor.46

Moreover, prior to Chapter 34, when the trust became irrevocable for any reason,a trustee was required by law to provide a copy of the "terms of the trust" to a heiror deceased settlor as well as to the beneficiaries.47 Again, the duty to send a copyof the "terms of the trust" to heirs was required even if the settlor was still alive.48

Once notification is served upon an heir or beneficiary, the heir or beneficiary has120 days from the date of service to contest the trust.49

D. Pension Trusts

A trust can be used to create a pension trust, where pensioners are thebeneficiaries.50 Some pension trusts are created by local agencies. 5 Moreover, someof these pension trusts allow beneficiaries to dictate the investment of their assets.52

Prior to Chapter 34, even with beneficiaries dictating the way the trust's assets wereinvested, trustees could be held liable if the investment strategy provedinadvisable.53

III. CHAPTER 34

A. Trustee's Compliance With an Heir's or Beneficiary's Request for a Copy ofthe Terms of the Trust

Chapter 34 changes the rules regarding when a trustee must comply with anheir's or beneficiary's request for a copy of the "terms of the trust. '5 4 The law nolonger requires the trustee to provide, upon request, a copy of the "terms of thetrust" to an heir of a deceased settlor or a beneficiary for a trust that has becomeirrevocablefor any reason.55 The new law only requires that a trustee provide a copy

46. 1998 Cal. Legis. Serv. ch. 682, sec. 10, at 2625-26 (amending CAL. PROB. CODE § 16061.7).47. 1998 Cal. Legis. Seiv. ch. 682, sec. 9, at 3625 (amending CAL. PROB. CODE § 16061.5(a)).48. ASSEMBLY COMMITrEE ON THE JUDICIARY, COMMITTEE ANALYSIS OF AB 460, at 4 (Jan. 11, 2000).49. CAL. PROB. CODE § 16061.8 (West 2000).50. CAL. GOV'T. CODE § 53216 (West 1997).51. Id. § 53215. A local agency is defined as a "city, city and county, district, school district, municipal or

public corporation, political subdivision, or other public agency of the State" or any part of the same. Id.52. ASSEMBLY COMMITrEE ON THE JUDICIARY, COMMIT-rEE ANALYSIS OF AB 460, at 4-5 (Jan. 11, 2000).53. Id. at 3-4.54. CAL. PROB. CODE § 16061.5 (amended by Chapter 34). The definition of "terms of the trust" has also

been redefined by Chapter 34. Id. § 16060.5 (amended by Chapter 34). In general, "terms of the trust" means a"written trust instrument of an irrevocable trust or those provisions of a written trust instrument in effect at thesettlor's death that describe or affect that portion of a trust that has become irrevocable at the death of the settlor."Id.

55. Compare CAL. PROB. CODE. § 16061.5(a) (amended by Chapter 34) (stating that a trustee must providea copy of the "terms of the trust" only upon request and only if the trust becomes irrevocable upon the date of deathof the settlor or upon a date specified in relation to the date of death), with 1998 Cal. Legis. Serv. ch. 682, sec. 9,at 3625 (amending CAL. PROB. CODE § 16061.5) (requiring that a trustee provide a copy of the "terms of the trust"

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only if the trust becomes irrevocable for one of two reasons.56 First, a copy isrequired if the trust becomes irrevocable as a result of the death of the settlor.57

Second, a copy must be sent if the trust becomes irrevocable based on a schemewithin the trust instrument that specifies a date within one year before or after thesettlor's death.58

B. Notification of Changes in the Trust

Chapter 34 also modifies the events that create the trustee's duty to servenotification. 59 A trustee no longer must provide notification if the trust becomesirrevocable for any reason.60 The same two conditions regarding the death of thesettlor that require a copy of the "terms of the trust" be provided to beneficiaries anda settlor's heirs apply to the notification requirement. 61 A trustee must also sendnotification when "a change of trustee of an irrevocable trust" is made.62 However,an heir of a settlor need not be notified unless she is also a beneficiary or the settlordied while acting as the trustee.63

C. Some Change to the Definition of "Terms of the Trust"

Chapter 34 redefines the "terms of the trust" so that instead of including "thoseprovisions of a written trust instrument that describe or affect an irrevocable portionof a trust," it now only includes those portions "in effect at the settlor's death thatdescribe or affect that portion of a trust that has become irrevocable at the death ofthe settlor." 64 When describing which parts of the trust instrument are included inthe "terms of the trust," the new law no longer addresses the parts of the trust that

upon request if the trust becomes irrevocable for any reason).56. CAL. PROB. CODE. § 16061 (amended by Chapter 34).57. Id.58. Id.59. Id. § 16061.7(a)(1) (amended by Chapter 34).60. Compare Id. (requiring the trustee to send notification when the trust becomes irrevocable under two

conditions based on the death of the settlor), with 1998 Cal. Legis. Serv. ch. 682, sec. 9, at 3625 (amending CAL.

PROB. CODE § 16061.7(a)(1)) (requiring the trustee to send notification when the trust becomes irrevocable for any

reason).61. CAL. PROB. CODE § 16061.7(a)(1) (amended by Chapter 34); supra notes 57-59 and accompanying text.62. CAL. PROB. CODE § 16061.7(a)(2) (amended by Chapter 34).63. Id.64. Id. § 16060.5 (amended by Chapter 34).

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affected the administration of the trust.65 However, it retains those parts that affectthe "disposition of the trust., 66

Nevertheless, the "terms of the trust" are not limited to those terms specificallyenumerated in the statute.67 Those terms that affect the administration of the trustmay still be part of the "terms of the trust., 68 Chapter 34 excludes from thedefinition of "terms of the trust" those parts of a trust that affect disposition "onlywhile the trust was revocable. '69 Additionally, if the settlor revises a trust, the "termsof the trust" do not include documents that are superseded by that revision.70 "Termsof the trust" under Chapter 34 also includes "any document irrevocably exercisinga power of appointment 7' over the trust or over any portion of the trust which hasbecome irrevocable.

72

D. Time Limitation for Contesting the Trust and Other Revisions

The new law also changes the types of events that trigger the requirement thata trustee include a warning with the notification that a time limit exists on the abilityof an heir or beneficiary to contest the trust.73 Instead of providing a warning whenthe trust becomes irrevocable for any reason, a trustee need only provide a warningif the trust becomes irrevocable for one of the same two conditions for which atrustee is required to send a notification or a copy of the "terms of the trust,"specifically, if the settlor dies or upon a date specified in the trust instrument relatedto the settlor' s death so long as that date occurs within one year before or after thedeath of the settlor.74

In addition, Probate Code section 16961.9 contains a revision to prior codesection 1606 1.7(f). 7 Instead of requiring a good faith effort to provide notificationand avoid "damages, attorneys fees, and costs," the trustee is merely required to

65. Compare id. (providing amended law without those sections that state that terms which affect theadministration of the trust are no longer included in the "terms of the trust"), with 1998 Cal. Legis. Serv. ch. 682,sec. 7, at 7 (amending CAL. PROB. CODE § 16060.5) (including sections that affect the administration).

66. Compare CAL. PROB. CODE § 16060.5 (amended by Chapter 34) (retaining the term "disposition"), with1998 Cal. Legis. Serv. ch. 682, sec. 7, at 7 (amending CAL. PROB. CODE § 16060.5) (including the term"disposition").

67. CAL. PROB. CODE § 16060.5 (amended by Chapter 34).68. Id.69. Id.70. Id.71. Power of appointment is the power to determine how much of the trust assets each beneficiary will

receive, if any. 4 BE. WITKIN, SUMMARY OF CALIFORNIA LAW, Real Property § 348 (9th ed. 1987).72. CAL. PROB. CODE § 16061.5 (amended by Chapter 34).73. Id. § 16060.7(h) (amended by Chapter 34).74. Id.; supra notes 57-59, 63 and accompanying text.75. Compare 1997 Cal. Legis. Serv. ch. 724, sec. 23, at 16 (enacting CAL. PROB. CODE § 16061.7(D)

(providing for trustee liability for failure to serve notification), with CAL. PROB. CODE § 16061.9(a) (amended byChapter 34) (revising version of the trustee liability provision based on new limitations of notificationrequirements).

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make a "reasonably diligent effort" to notify heirs and beneficiaries.76 However, foran heir who is not a beneficiary, a reasonably diligent effort "means that the trustee

has sent notice by first-class mail to the heir at the heir's last mailing addressactually known to the trustee."77 The prior law under section 16061.7(h) of the

Probate Code, regarding a trustee's reliance on "any final judicial determination of

heirship" or a trustee's discretion in making that determination if the trustee is

unaware of a judicial determination, or none exists, is retained in subdivision (c) of

the amended statute.78 Chapter 34 also allows a trustee to consider that the period

to contest a trust has not expired when she exercises discretion regarding how or

when to distribute trust assets.79

In addition, Chapter 34 limits the liability of trustees of pension plans and other

pension instruments. 80 The new law declares that no corporate trustee or custodian

of a pension trust will be liable for the losses that result from a beneficiary's

direction of her own investments.8 Justification of this provision is based on the fact

that the beneficiaries often direct the investments, but because some plans use a trust

framework, the onerous liability of trustees is still present.82 In fact, before Chapter

34, beneficiaries could sue trustees for their losses even though the trustees had

nothing to do with the investment choice.83 Chapter 34 makes beneficiariesresponsible for their own decisions. 84

IV. ANALYSIS

A major change occurs to a trust when it becomes irrevocable.85 Before a trust

becomes irrevocable, for all intents and purposes, the trust property still belongs to

the settlor.86 Once the trust becomes irrevocable, the trust assets can no longer be

taken back by the settlor; and any interest of a beneficiary suddenly becomes vested

76. Compare 1997 Cal. Legis. Serv. ch 724, sec. 23, at 16 (enacting Cal. Prob. Code 16061.7(0) (requiring

a trustee to make a good faith effort to provide notification), with CAL. PROB. CODE § 16061.9(b) (enacted by

Chapter 34) (stating that a trustee must make a "reasonably diligent effort" to provide notification).

77. CAL. PROB. CODE § 16061.9(b) (enacted by Chapter 34).

78. Compare 1998 Cal. Legis. Serv. ch. 682, sec. 10, at 9 (amending CAL. PROB. CODE § 16061.7(h))

(declaring that a trustee may rely on ajudicial determination of heirship or use her discretion to make her own "good

faith determination" of heirship in the absence of such judicial determination), with CAL. PROB. CODE § 16061.7(c)

(amended by Chapter 34) (allowing a trustee to rely on a judicial determination of heirship or use her discretion to

make a "good faith determination" of heirship if the trustee does not know of any judicial decision).

79. CAL. PROB. CODE § 16061.9(c) (enacted by Chapter 34).80. CAL. GOV'T. CODE § 53216.8 (enacted by Chapter 34).81. Id.82. SENATE RULES COMMITTEE, SENATE FLOOR ANALYSIS OF AB 460, at 2 (Apr. 25, 2000).

83. Id.84. CAL. GOV'T. CODE § 53216.8 (enacted by Chapter 34).

85. See RESTATEMENT (THIRD) OF TRUSTS § 25 cmt. b (Tentative Draft No. 1, 1996) (inferring that when

a trust becomes irrevocable, the beneficiaries' rights become vested and the settlor's power comes to an end).

86. Id. § 25 cmt. a.

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and cannot be taken away.87 Furthermore, the law does not treat the settlor as if sheowned the property unless she is a trustee or a beneficiary.88 Irrevocability of a trustresulting from the settlor's death is similar to the passage of ownership of assetsfrom the testator89 to the devisees9° of a will upon the death of a testator.9, Once thetestator is dead, the testator's heirs might have a claim and are notified of thedisposition of the assets even if the heirs are not devisees of the will. 92 Likewise, thelaw requires heirs to be notified when a settlor's death causes the trust to becomeirrevocable. 93 Chapter 34 does not change these notification requirements.94

If a person merely wants to give her wealth away during her lifetime and doesnot want to create an irrevocable trust to do so, she may grant a lifetime gift.95 Whena donor 96 gives a gift to someone during her lifetime, the donor's heirs do not haveto be notified.97 Since the donor is still alive, the money is hers to dispose of as shepleases.

However, prior to Chapter 34, whenever a revocable trust became irrevocable,whether the settlor was alive or dead, the settlor's heirs would always be notifiedbecause a trustee would have to send a copy of the "terms of the trust" to the heirs. 98

If a person has privacy concerns, this notification requirement might cause thatperson to steer away from use of a trust instrument, and instead give an irrevocablegift during her lifetime, since heirs do not have to be notified when giving outrightinter vivos gifts.99 Since an heir has no right to determine what a settlor does withher money, it seems inappropriate to force a trustee to notify the heir about the

87. Id. § 25 cmt. b.88. Id.; id. § 2 cmt. d (Tentative Draft No. 1, 1996).89. A testator is a person who writes a will to give away her property at death. 20A AM. JUR. LEGAL FORMS

2D Wills § 266 (1994).90. A devisee is a person who inherits property by will. RESTATEMENT (THIRD) OF PROPERTY: WILLS &

DONATIVE TRANSFERS § 1.1 cmt. a (1998).91. See RESTATEMENT (THIRD) OFTRUSTS § 25 cmt. a (Tentative Draft No. 1, 1996) (comparing the interests

of a beneficiary of a revocable trust upon the death of the settlor to the interests of a devisee of a will).92. See CAL. PROB. CODE § 8110(a) (West 1991) (requiring a petitioner probating a will to notify a testator's

heirs).93. Id. § 16061.7(a)(1) (amended by Chapter 34).94. Id. (requiring the trustee to send notification when the trust becomes irrevocable based on the death of

the settlor); 1997 Cal. Legis. Serv. ch. 724, sec. 23, at 15 (enacting CAL. PROB. CODE § .16061.7(a)(1)) (same).95. 4 B. E. WITKIN, SUMMARY OFCALIFORNIA LAW, Personal Property § 101 (9th ed. 1987 & Supp. 1999).96. See id. (using the term donor as a person who gives property to another without receiving consideration,

such as a gift-giver).97. See Holt v. Holt, 61 S.E.2d 448, 451 (N.C. 1950) (asserting that a property owner, while alive, can do

as he pleases with his property and an heir has no legal rights regarding the property); Hall v. Hall, 100 A. 441,442(Conn. 1917) (same); see also RESTATEMENT (THIRD) OF TRUSTS § 41 (Tentative Draft No. 2 1999) (illustrating anexpectancy, which is a hope that one will inherit property from someone, but is not considered an interest).

98. 1997 Cal. Legis. Serv. ch. 724, sec. 22, at 15 (enacting CAL. PROB. CODE § 16061.5(a)) (requiring thetrustee to send a copy of the "terms of the trust" when the trust becomes irrevocable for any reason).

99. See CAL. PROB. CODE § 16061.7(a)(1) (West 2000) (requiring the trustee to send notification when thetrust becomes irrevocable for any reason); see also Holt, 61 S.E.2d at 451 (declaring that a property owner may doas he pleases with his property while living).

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settlor's actions.'I° Chapter 34 remedies this problem.'' Chapter 34 only requiresthat a trustee send an heir a copy of the "terms of the trust" or notify an heir whenthe trust becomes irrevocable because the settlor has died. 102

Of course, the phrase "based on the settlor's death" creates its own problems. 10 3

If the trust instrument states that the trust becomes irrevocable upon the date of thesettlor's death, notification is clearly required.'1 4 But when the trust instrument'sterms state that the trust becomes irrevocable upon a date other than the date of thesettlor's death, the notification requirement can be avoided. 10 5 This could be unfairto heirs. 0 6 Hypothetically, if the trust terms state that the trust becomes irrevocableone month before the date of the settlor's death, the trust technically does notbecome irrevocable upon the death of the settlor.'0 7 A person who wishes to undulyinfluence a settlor's terms of the trust could use this technicality to prevent thesettlor's family from knowing about the trust and thus prevent the family'sinterference with the disposal of the trust. 10 8 Fortunately, Chapter 34 requires bothnotification and availability of a copy of the "terms of the trust" when the trustbecomes irrevocable either upon the date of the settlor's death or upon a datespecified in the "terms of the trust" but based on the settlor's death."°9 Therefore, ifundue influence is pressed upon the settlor in such situations, the heirs will have theopportunity to intervene."l0

V. CONCLUSION

People should be able to keep their financial dealings confidential if they sodesire."' While other ways to give money to people during one's lifetime certainlyare available, a person should be able to use a trust and keep her privacy." 2 Ofcourse, to notify a settlor' s heirs about a settlor' s financial dealings when the settlor

100. See ASSEMBLY COMMITrEE ON JUDICIARY, COMMITTEE ANALYSIS OF AB 460, at 4 (Jan. 6, 2000)

(asserting that notifying an heir when a trust becomes irrevocable if the settlor is still alive "could impinge on the

privacy rights of' a settlor, who may wish to keep the trust and its terms confidential).

101. See CAL. PROB. CODE § 16061.5(a) (amended by Chapter 34) (requiring the trustee to send a copy of

the "terms of the trust" when the trust becomes irrevocable either at the death of the settlor or at a time specified

in the trust instrument so long as it is within one year of the settlor's death).102. Id. §§ 16061.5, 16061.7 (amended by Chapter 34).

103. ASSEMBLY COMMITrEE ON JUDICIARY, COMMITTEE ANALYSIS OF AB 460, at 4-5 (Jan. 11, 2000).104. Id.105. Id.106. Id.107. Id.108. Id. at 3.109. CAL. PROB. CODE §§ 16061.5, 16061.7 (amended by Chapter 34); ASSEMBLY COMMITTEE ON THE

JUDICIARY, COMMITTEE ANALYSIS OF AB 460, at 4-5 (Jan. 11, 2000).

110. See SENATE RULES COMMITIEE, FLOOR ANALYSIS OF AB 1127, at 6 (Aug. 28, 1997) (asserting that the

requirement placed upon trustees to notify heirs of settlors will decrease the incidence of concealment of the "terms

of the trust" or the existence of the trust itself).

11l. ASSEMBLY COMMITTrEE ON JUDICIARY, COMMITTEE ANALYSIS OF AB 460, at 4 (Jan. 11, 2000).

112. Supra notes 97-102 and accompanying text.

2001 /Estates and Trusts

dies makes sense, but notifying the heirs when the settlor is still alive invades thesettlor's ability to keep her own financial activities private." 3 On the other hand, atrust which deprives an heir of being notified and thus the opportunity to contest thetrust when it becomes irrevocable because the settlor dies is patently unfair."14 Anheir should be notified so that she can investigate the circumstances under which thetrust was created and contest it if she thinks the settlor was unduly influenced.15Assets of a revocable trust belong to the settlor until the settlor's death. 16 Chapter34 recognizes this property right. 17 Not only does Chapter 34 protect the privacy ofthe settlor, it also protects the heirs when the settlor dies.18

Supra notes 100, 109 and accompanying text.Supra note 109 and accompanying text.Supra notes 108-09 and accompanying text.Supra note 97 and accompanying text.Supra notes 101-02 and accompanying text.Supra notes 101-02, 108-09 and accompanying text.